ST Microelectronics decides to exit ST-Ericsson

The European chipmaker announces new strategic plan, and new financial model targeting 10 percent or more operating margin

STMicroelectronics has decided to exit ST-Ericsson tie-up and announced a new strategic plan.

Europe's largest semiconductor chip maker has embarked on this path after a strategic review that started more than a year ago.

STMicroelectronics is a French-Italian multinational electronics and semiconductor manufacturer headquartered in Geneva, Switzerland. Its Asia Pacific headquarters is in Singapore. In 2011, the company's net revenues were $9.73 billion.

"Today we are announcing the new ST, aligned with the new market environment," said Carlo Bozotti, president and CEO of ST on 10 December. "Based on that, we have made the decision to exit ST-Ericsson after a transition period. We will continue to support ST-Ericsson as their supply-chain partner, advanced process-technology partner and application-processor IP provider."

The chip maker said that as a consequence of the major changes that occurred in the dynamics of the wireless market, ST has taken the decision to exit ST-Ericsson after a transition period and is currently in negotiations on exit options. This disengagement process has started, with the transition expected to end during the third quarter of 2013.

While no further details can be provided at this time, any option taken will be in line with the new financial model as presented by ST today. However, ST will continue to support ST-Ericsson as its supply-chain partner, advanced process-technology partner (FD-SOI) and application-processor IP provider.

"Our new strategy is centered on leadership in sense and power and automotive products, and in embedded-processing solutions," continued Bozotti. "Our specific focus is on five product areas: MEMS and sensors, smart power, automotive products, microcontrollers, and application processors including digital consumer. These families are expected to experience solid growth rates driven by secular trends and fit extremely well with our market-leading positions and competitive advantages.

"Our innovative products in these areas, combined with our world-class technology and manufacturing, bring us even more opportunities to significantly grow and gain market share.

"The new ST will be more focused, leaner and better positioned to deliver value to our customers and our shareholders, targeting to rapidly achieve operating margins of 10 percent."

New strategy and financial model

The company said its new strategy is based on two product-segment organisations: Sense & Power and Automotive Products; and Embedded Processing Solutions.

In line with the new financial model, the company expects both product segments to be profitable and to generate cash. ST will address an estimated $140 billion market in 2013 and has significant potential to grow and gain market share, said a company spokesperson.

ST is also targeting an operating margin of 10 percent or more. In order to achieve the new financial model, ST expects to reduce quarterly net operating expenses to an average quarterly rate in the range of US$600 million to $650 million by the beginning of 2014.